7/30/2010 @ 11:48AM

Why Amazon Will Win The Internet

In the 33 months since the launch of Amazon’s Kindle platform, sales of Kindle e-books have surpassed sales of hardcover books. Amazon CEO Jeff Bezos predicts that e-book sales will surpass paperback sales within the next 12 months, and combined hardcover and paperback sales soon after that. This despite the fact that the 600,000 titles in the Kindle bookstore represents only a fraction of Amazon’s inventory.

That the success of the Kindle is good news for Amazon should go without saying. But it represents a remarkable environmental advance as well. The publishing industry in the U.S. felled roughly 125 million trees and generated vast amounts of wastewater. And, of course, physical books have to be transported by trucks, which generate carbon emissions, exacerbate congestion, increase traffic fatalities and cause wear-and-tear on already overburdened roads. One assumes that Bezos didn’t have the environment foremost in mind when he pushed the Kindle concept forward, yet he’s arguably done more to fight climate change by threatening hardcovers and paperbacks with extinction than any number of environmental activists.

The Kindle is a beautiful example of the phenomenon visionary architect and futurist Buckminster Fuller called “ephemeralization,” in which human societies use fewer raw materials to accomplish tasks as they grow more advanced. The rise of Zipcar is another perfect example. Whereas many city-dwellers might have once owned an automobile for the sole purpose of occasionally ferrying groceries from supermarket to apartment building, those same city-dwellers can now rely on a low-cost car-sharing service. Over the next decade an ever larger share of these automobiles will be built of ultradurable, ultralight carbon fiber, which will further lighten the environmental load of driving.

A more ephemeral economy places heavier emphasis on taste, identity and friendship. As we grow more affluent, we place heavier emphasis on consumption than on production. We choose our partners not on the basis of who will prove the best breadwinner but rather on who will be the most congenial company. In a similar vein, we’re more likely to choose where we live on the basis of amenities. The most important amenity is increasingly the presence of like-minded people or, more prosaically, people who like to consume the same things and experiences.

The rapid rise of location-based services on the Web–including Foursquare, Gowalla, Latitude and Loopt, among many others–is rooted in the powerful promise of a real world that can be indexed and organized as cleanly and coherently as
Google
has indexed and organized the Web. A tool like Foursquare allows you to “check-in” to your favorite businesses, allowing friends to know when you’re in a particular dive bar and how often you go. And local business owners, in turn, get a better sense of who they’re serving and how they can serve their customers better. These are the kind of metrics and insights that have fueled the explosive growth of Amazon and other successful e-commerce firms.

Entrepreneur Mark Cuban recently caused considerable consternation by envisioning a world in which people will never have to actively check in. Rather, everyone will be monitored by video cameras that will use sophisticated facial recognition software and a vast database of Facebook profile photos to pinpoint the identities of everyone in a crowd. This will allow your local eatery to give you a personalized greeting, and a menu that only lists the foods it knows you love. Many argue that this is profoundly unlikely, as the mass public will object to being monitored so closely. Yet the rapid proliferation of CCTV suggests otherwise. If passive check-in offers consumers tangible benefits, it seems likely that the vast majority will happily accept the death of anonymity, with the holdouts finding themselves on the margins of society.

Despite the ravaging effects of high unemployment, the ephemeralization of the economy continues unabated. Facebook, with 500 million members worldwide, might be the most vivid illustration of ephemeralization–a large and growing business that, apart from a few server farms and a few cubicle farms, has few tangible assets–and it has recently teamed up with Amazon to make Amazon’s recommendations more “social.”

If I had to make a bet on which company would define the ephemeralization era, it would be Amazon and not Facebook. Facebook sees itself as a “social utility,” an infrastructure that will remake the Web. But Facebook sufers from a fatal flaw. People cultivate an identity on Facebook by carefully selecting likes and dislikes, which might or might not reflect reality. Amazon, in contrast, knows exactly where you spend your money, thus giving it a more intimate portrait of the real you. A marriage of Amazon and Facebook would create an unstoppable juggernaut.

On its own, however, Amazon has proven to be a wily innovator that eschews the spotlight while hoovering up billions of dollars in commercial transactions–$6.57 billion in the second quarter of 2010 at $0.45 earnings per share, to be precise. Though Amazon is often accused of having an intensely secretive culture, Bezos has been shrewd about letting Kindle e-books be sold on any platform, including
Apple’s
iPad.

Though Amazon is primarily a retailer, it has pursued a number of other business opportunities that seem likely to expand in the years and decades to come, including Amazon Web Services, which allows other companies to rent a portion of Amazon’s vast computing power, and Mechanical Turk, an artificial artificial intelligence program that allows would-be employers to hire workers a small task at a time. In a small way Amazon has already paved the way towards becoming a service provider rather than just a seller of physical goods, creating a platform that allows power sellers, Web startups and countless others to make real money. Rest assured, the company that brought us the Kindle has many more innovations up its sleeve.